According to one study, Medicare could save more than $4 billion per year – simply on insulin alone – if the program was allowed to negotiate drug pricing in the same way the U.S. Department of Veterans Affairs (VA) can negotiate.
The study, published February 3, 2020, in JAMA Internal Medicine, comes from researchers at the Brigham and Women’s Hospital and Harvard Medical School in Boston.1
In 2017, Medicare spent almost $8 billion on insulin through the coverage provided by Medicare Part D. Medicare Part D prescription drug plans are sold by private insurance companies and provide prescription drug coverage to Medicare beneficiaries.
Medicare Part D plans are prohibited by law from negotiating prescription drug costs with pharmaceutical companies. The VA, on the other hand, is permitted to negotiate drug prices and obtain discounts from pharmaceutical companies. The VA has also established a national formulary, or a list of drugs that are approved for treatment.
According to the study, Medicare as a whole could recoup around $4.4 billion per year if it were allowed to negotiate insulin prices. Researchers looked at 31 different insulin medications and compared Medicare Part D spending in 2017 to that of the VA for the same medications.
Total insulin spending by Medicare was $7.8 billion after manufacturer rebates. If Medicare had been allowed to negotiate this spending, the program could have saved $2.9 billion. And if Medicare was able to use the VA’s pricing and have a standard formulary, projected savings could reach $4.4 billion.
“Medicare now accounts for a third of all drug spending. Legislation allowing Medicare to negotiate prices and establish a central formulary would help save taxpayers money. We just looked at insulin, but other studies have shown other drugs would have savings as well.” Dr. William Feldman, study lead author.2
Medicare Part A and Medicare Part B make up what is called “Original Medicare” and are provided and administered by the federal government. Original Medicare does not typically offer coverage for prescription medications such as insulin.
Medicare Part B may provide coverage for insulin in some cases only if it’s administered with a pump. Medicare beneficiaries otherwise must turn to private Medicare Part D prescription drug plans if they want coverage for insulin and other medications.
Medicare Advantage plans (Medicare Part C) are privately sold insurance plans that cover everything that Original Medicare covers, and most Medicare Advantage plans also offer prescription drug coverage.
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